new product development - intexa.com · handle npd? the new product development manager or...

New Product Development Building the future

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William C. (Bill) Smith

INDUSTRIAL TEXTILE ASSOCIATES, LLC

110 Shady Creek CourtGreer, SC 29650

864-292-8121/800-292-0324/Fax 864-292-5333

Email: [email protected] URL: www.intexa.com

© 2001, ITA, Greer, SC, TTNA Symposium 2001

TTNA Symposium 2001

New Product Development - Building theFuture

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From a typical catalog in the early1900’s, 75% of products listed areno longer being made, or havechanged so much as to berecognizable only as “generic.”

TTNA Symposium 2001


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In the next 50 years:

• 75% of today’s products will be obsolete or radically different

• 1/3 of products that will be made will be copies of new products from someone else

• 1/3 of products that will be made have not been thought of yet

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In the next 5 years, 31% of thetypical company’s profits will comefrom new products!

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In the next 5 years, sales growthwill be the result of:

• New Products ----------- 37% • Acquisitions ------------- 9% • Existing Products ------ 54%

Almost half a company’s sales growth willbe from products they do not now make!

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Only 1 in 20 new products willachieve a significant share of the

market or make a worthwhilecontribution to the bottom line!

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Of all new products:

• 60% lose money

• 30% break even (or close)

• 8% are somewhat profitable

• 2% provide a good return

The odds for success are very long

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Successful new-product companies donot spend more, as a percentage of sales,than the unsuccessful ones on R&D andpromotion of new products!

The difference between success andfailure is management!

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ANY product that does not:

• Achieve significant market penetration,

• Contribute an important share of the

corporate sales volume, or

• Accomplish that which could be

reasonably expected of it

is a FAILURE!

TTNA Symposium 2001


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TTNA Symposium 2001


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How quickly can things change?• When Michelin introduced radial tires, the marketshare for bias-ply tires plunged 60% in just 18 months!

----New technology replacing the old

• In March, 2000, Palm had 91.7% of the hand-held PDAs

-- By September, 2000, Palm’s share had dropped to 65.4%!

-- Handspring’s share went from virtual zero to 21.6%

---- Same technology with new twist or new competitor

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TTNA Symposium 2001


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The earlier you kill new products

destined to fail,

the more development time andmoney you save!

Kill it Early!

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Evaluation must continue throughoutthe entire life cycle of all products!

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We must know how to read the curves,

--understand where products and technology

are on the product life cycle,

-- and act on that information.

Doing so will save considerable amount of

time and money.

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Innovation, and the proper application

of information, is the attackers advantage!- Richard Foster

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To be successful, a company must be committed to theconcept of new products being the lifeblood of thecompany’s future. They must:

• Organize for the work involved

• Establish clear criteria and goals

• Set up the staff

• Work out the procedures

• Actively support the work

STAND BACK AND ALLOW THE PROCESS TO WORK!

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Evaluation must continue throughoutthe entire life cycle of all products!

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“The second hardest thing to do is to get peopleto accept the concept of life cycles and gettingthem to think about developing new products

to replace the existing line …”

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The company knows that at “A” -- when five-year old product 1 is about to take off -- itmust commit to product 2, so it will be ready when product 1 matures. The company willintroduce 2 at “B”, when product 1, though selling well, is due for decline

Figure 3A

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The hardest thing?

Coming up with ideas for the nextsuccessful product!

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Classes of New Products:

• New to everybody

• New to your firm

• Not new to you but will be new to

most who will use it

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Sources for New Product Ideas:

Outside-In Sources ��K Customer Suggestions K Academic/Research InstitutionsK Competitors Suggestions K LicensingK Consultant/Mkt Research K Patent LiteratureK Fiber/Yarn/Chem Suppliers K Gov’t Info and NeedsK Trade Press/Media K Trade Shows/SeminarsK Equipment Suppliers K Technology Forecasts

Inside-Out Sources: ��L Salesmen L Corp. R&D DepartmentsL Other Employee Suggestions L Mkt’g & Product ManagementL Internal Market Research L New Product/Fabric DepartmentsL Task Forces/Brain Storming Figure 9

TTNA Symposium 2001


itaFigure 9-A

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Product Old NewCustomer

Old 1 3

New 2 4

Marketing Matrix1) Cheapest way to increase sales - sell an Old customer more of an Oldproduct2) Next cheapest is to sell an Old product to a New customer3) Next is to sell a New product to Old customers4) the most expensive way is to sell a New product to New customers

Figure 8

TTNA Symposium 2001


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TTNA Symposium 2001


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Acumen:

The ability to make quick accurate judgements

Creativity:

The ability to generate new options

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Acumen:

• Taught -- in business schools

• Practiced -- in business

• Rewarded -- by the company

Creativity:

• Generally not taught, practiced, or rewarded

Only 5% of companies pay NPD executives abonus tied to performance of new product entries

TTNA Symposium 2001


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TTNA Symposium 2001


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NPD is an innovative process and carried

out in the arenas of: • Engineering (can we design it)

• Production (can we make it)

• Marketing (can we sell it)

And, to some degree, Finance (can we afford it)

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NPD is a cross-functional process --- BUT ...

Responsibility for NPD should not be in the hands of a

COMMITTEE! • Responsibility spread too thin as to be burdensome

• Enjoyable opportunity, for many, without doing homework

• Too easily dominated by one or a group

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Committees are involved in the majority ofmost company’s NPD efforts:

yet

75% are unhappy with the NPD results!

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Before discussing who should have NPD responsibility, we should look at

Who should not have responsibility for NPD:• Research Manager - Too attached to project

• Production Manager - Don’t disrupt flow

• Sales Manager - Concerned with quick order

• Controller - Husbands resources

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Who should handle NPD?

The New Product DevelopmentManager or Director -

with staff status!

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TTNA Symposium 2001


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Is there a role for a NPD committee?

YES ...

To review, evaluate, and give input!

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Typical New Product Development Plan

1) Market Research

2) ANALYSIS 3) Product Development Process 4) MORE ANALYSIS 5) Forecasting 6) Planning for Production

7) MORE ANALYSIS 8) Production 9) Market Introduction

10) Accelerated Sales Growth

= SUCCESS Figure 10

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TTNA Symposium 2001


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Figure 8-1

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Reasons for Market Research:

• To get information for decision making

• To prove or confirm something already

known (or you think you know)

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Conduct Market Researchat Appropriate Time and Level:

Avoid “Analysis Paralysis”

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Initial Market Research may be needed todetermine certain information for planning andproceeding … But

Level of detail needed will vary withcircumstances and may not be neededuntil much later in the process, if at all!

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Three Signals of Market Opportunity:

• Market growing faster than leader can

maintain

• New technology available -- new firms

using it but not most existing firms

• Long delivery times

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New Product Opportunity:

A combination of

market needs and capabilities!

TTNA Symposium 2001


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TTNA Symposium 2001


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Avoid the “NIH” Syndrome

(Not Invented Here)

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TTNA Symposium 2001


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Find Problems for your Solutions!Everyone has strengths - use them to solve problems!

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New Product DevelopmentMust Have a Plan

to Succeed!

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Typical New Product Development Plan = SUCCESS

10) Accelerated Sales Growth

9) Market Introduction

8) Production

7) MORE ANALYSIS

6) Planning for Production

5) Forecasting

4) MORE ANALYSIS

3) Product Development Process

2) ANALYSIS

1) Market Research

Figure 10

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Master plans need not be complicated

to succeed!

But you must have a plan --- and follow it!

TTNA Symposium 2001


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TTNA Symposium 2001


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The various positions of market entry:

• First to market -- “We think we have a winner”

• Early Entrant -- “Later but better”

• Late to Market -- “Better late than never”

Kay Crippen, PhD, University of Singapore

There are advantages for both pioneers and followers!

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Substantial Sales Volume Ever Widening Market Penetration

New Facilities for Lower Costs Increased Market Penetration

Redesign for Larger Volume Production and Inventory Upgrades

Volume Mounts Begin Sales

Introduction to Sales Force/Distributors Inventory Buildup Facilities Prepared Decision to Begin Production

Production Methods Established Final Design Management Approval Profitability Established Market Verified Feasibility Study Conception

The Market Development Path

Success - Profits

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It is vital to success to:

• Establish timelines

• Assign responsibilities - and properly staff it

• Follow-up to be sure timing being met

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NPD is a

DELIBERATE

process!

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Deliberate Actions: New Facilities for Lower Costs Increased Market Penetration

1) Analysis Redesign for Larger Volume Production and Inventory Upgrades

2) Planning Volume Mounts Begin Sales

3) Scheduling Introduction to Sales Force/Distributors Inventory Buildup Facilities Prepared Decision to Begin Production



Success - Profits

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Constant communications and reviewImperative!

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Debug the new product beforeintroduction!

First production - on the market -should work!

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Debugging in the field - during the

first few months of production -

is suicidal!(for most companies)

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The “me-too” approach is the mostcommon form of NPD -

But not for highly successfulcompanies!

TTNA Symposium 2001


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To be successful, a company must be committed to theconcept of new products being the lifeblood of thecompany’s future. They must:

• Organize for the work involved

• Establish clear criteria and goals

• Set up the staff

• Work out the procedures

• Actively support the work

STAND BACK AND ALLOW THE PROCESS TO WORK!

TTNA Symposium 2001


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Haphazard efforts will yield

Disappointing results ---

and Drain company resources

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Critical Questions: Will Management Support NPD?

1) Has product been in development for a year?

2) Does your company now make a similar product?

3) Does your company now sell to a related customer market?

4) Is R&D budget sufficient to fully develop the product?

5) Will he product be thoroughly field tested for at least six months?

6) Does the person in charge have a personal assistant?

7) Will the product be actively promoted at trade shows and magazines?

8 Is a recognized similar product or brand name already on the market?

9) Would the company take a loss on it for at least a year?

10) Does the company “need” the product more than it “wants” it?

10 of 20

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Critical Questions: Will Management Support NPD?

11) Is there a plan to promote or advertise the product?

12) Is the product really new as opposed to improved?

13) Can the decision to buy it be made by only one person?

14) Is the product to be made in fewer than five versions?

15) Will the product not need aftermarket technical service?

16) Does the development team have a working code name?

17) Will the company president see the project leader w/o appointment?

18) Did the project leader make a “GO” of at lease two products?

19) Will the product be on the market for more than 10 years?

20) Would project leader quit and take project with him/her if company says it

won’t back the project?15+ = success assured; 11-14 = probable; 8-10 = “coin toss,” under 8 = drop and go elsewhere.

SOURCE: Adaptation of Greunwald: New Product Development, Crain Books, 1985

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“In going in one direction, you are

automatically not going in any

other direction … BUT

You must make a choice if

progress is to be made!”

Source: Fredrick D. Buggie, NEW PRODUCT DEVELOPMENT STRATEGIES, AMACON

TTNA Symposium 2001


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TTNA Symposium 2001


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William C. (Bill) Smith

INDUSTRIAL TEXTILE ASSOCIATES LLC

110 Shady Creek CourtGreer, SC 29650

864-292-8121/email: [email protected]

www.intexa.com

TTNA Symposium 2001


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TTNA Symposium 2001


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Deliberate Actions: New Facilities for Lower Costs Increased Market Penetration

1) Analysis Redesign for Larger Volume Production and Inventory Upgrades

2) Planning Volume Mounts Begin Sales

3) Scheduling Introduction to Sales Force/Distributors Inventory Buildup Facilities Prepared Decision to Begin Production



Success - Profits

TTNA Symposium 2001


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Pioneer’s Advantage • Establishing a position in the industry mind

• Setting cost/experience barriers for later entrants

• Gaining long term market share advantages

• Entrenching the firm’s image and reputation

SOURCE: Doug Jackson,k LMRA, Weaverville, NC

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Follower’s Advantages • Verification that the market is really there

• Benefiting from the pioneer’s experience

• Assessing the situation and introducing better design

and technology

• Selecting the best micro niche

SOURCE: Doug Jackson,k LMRA, Weaverville, NC

TTNA Symposium 2001


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TTNA Symposium 2001


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How to wreck a new product:

• Don’t introduce it at all

• Introduce it too early

• Hold up introduction to a

“more convenient time”

Timing is crucial!

TTNA Symposium 2001


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TTNA Symposium 2001


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Of all the new product failures, themost common is where productionand sales begin at the same time

(or sales are made before)

new product development - intexa.com · handle npd? the new product development manager or...

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